UK: Green Energy And The 2012 Budget

In his annual budget address yesterday, George
Osborne announced that he wants to see "investment in our
world-leading energy sector, including renewables" (albeit
that those projects are to be "fiscally sustainable" and
not to place too heavy a burden on the consumer) and work towards
meeting the UK's carbon reduction targets. So what made up the
"Green" aspects of the Budget?

Carbon Reduction Commitment (CRC)

Osborne strongly criticised the CRC in his address and described
it as "cumbersome" and "bureaucratic" and is to
consult on simplifying the CRC energy efficiency scheme to reduce
administrative burdens on business. Should significant
administrative savings not be deliverable, he has said he will
bring forward proposals in autumn 2012 to replace CRC revenues with
an alternative simpler environmental tax. Osborne also
confirmed that the Government will engage with businesses before
then to identify potential options, so those who have been looking
for a change to the CRC may have the opportunity to be
directly involved in the Government developing a better,
simpler option.

Carbon price floor and Climate Change Levy (CCL)

The Government will set 2014–15 carbon price support
rates in line with the carbon price floor set out at Budget 2011
and are to make a number of additional legislative provisions with
effect from 1 April 2013. These were confirmed as: changes to
the treatment of solid fuels (including changing the way the rate
for solid fuels is calculated); the introduction of a generating
capacity threshold of 2MW before electricity generators will be
liable to the carbon price support rates of CCL; and all generators
will be required to self-account.

This year's Budget confirmed that CCL rates will increase in
line with RPI from 1 April 2013, and as announced in Budget 2011,
Climate Change Agreements (CCA) will be extended to 2023. In
addition the CCL discount on electricity for CCA participants
available from 1 April 2013 will, as announced in the 2011 Autumn
Statement, be increased to 90% as part of a package of measures to
support energy-intensive industries exposed to international
competition.

As set out in Budget 2011, the CCL exemption for electricity
from CHP plants supplied indirectly to business energy consumers
will be removed from 1 April 2013. This year Osborne confirmed that
electricity utilities will be able to continue to allocate CHP LECs
until 31 March 2018. In addition fossil fuels used to
generate heat in a good quality CHP plant will not be liable to the
carbon price support rates, subject to State aid approval.

Green Investment Bank

Following the announcement on 8 March that the headquarters of
the Green Investment Bank would be in Edinburgh, with the main
transaction team based in London, the Government confirmed in the
Budget that the GIB has been established and is set to make its
first set of green investments in April 2012, which will no doubt
be a welcome injection into the industry. However it must be
noted that there is still the matter of state aid approval which
has yet to be obtained.

Efficiency

The Budget also announced the introduction of enhanced capital
allowances for energy-saving and water-efficient
technologies. The list of these designated technologies
qualifying for the enhanced capital allowances will be updated
during summer 2012, subject to State aid approval.

The Green Deal

Within the Budget the Government also confirmed that it has
introduced other initiatives as part of the "Green Deal",
including: the introduction of the Renewable Heat Incentive; the
provision of £1billion to support the commercialisation of
Carbon Capture and Storage; the ROC Banding Review; and the
development of 5 new Centres for Offshore Renewable
Engineering.

This article was written for Law-Now, CMS Cameron
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give professional or legal advice. All Law-Now information relates
to circumstances prevailing at the date of its original publication
and may not have been updated to reflect subsequent
developments.

The original publication date for this article was
22/03/2012.

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